Amazon Nets $2.5 Billion in Q2

Thanks in part to AWS, advertising and 'efficiencies'

Amazon had a big quarter.
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Amazon announced its financial results for the second quarter of 2018, saying net sales increased 39 percent to $52.9 billion—compared with $38 billion in the second quarter a year ago—and net income was $2.5 billion.

In a conference call that included zero remarks other than a few disclosures upfront and launched straight into the question-and-answer segment, chief financial officer Brian Olsavsky called it a strong quarter, attributing that strength to Amazon’s most profitable areas, including cloud services platform Amazon Web Services, its growing advertising business and “better than expected efficiencies in infrastructure costs and fixed costs.”

Olsavsky said Amazon is very happy with the results it is seeing with AWS as customers have migrated more than 80,000 databases using its AWS database migration service and branched out into new products, including machine learning, AI, the internet of things and serverless computing. New enterprise customers in Q2 include Ryan Air, Epic Games, Zulily, 21st Century Fox, Verizon and Oath, Major League Baseball, and Formula One.

“I think when you look at it, why they come to us is functionality and pace of innovation,” Olsavsky said. “We … have proven reliability and performance … [and] use customer feedback to develop new features.”

Olsavsky called advertising a “multibillion-dollar business” for Amazon and said the platform is seeing strong adoption across a number of fronts, including vendors, sellers, authors and third parties using its services to achieve marketing goals like brand awareness, discovery or purchase decisions.

Further, he said, its priorities include the usability of advertiser tools and new products.

“We think measurement is important,” he said. “Advertisers understand what outcomes they are driving on our properties and we are uniquely positioned to show the benefits of advertising.”

When it came to Amazon’s June 2018 acquisition of online pharmacy PillPack, Olsavsky had tighter lips, saying Amazon expects the deal to close in the second half of the year.

“I think the company has a really highly differentiated customer experience and has done a great job getting to size/scale and I think it can expand in the future,” he said.

Olsavsky likened PillPack to other Amazon acquisitions, saying the platform looks for well-run companies with a great customer experience and obsession that matches its own.

When asked about the monetization of voice, Olsavsky said Amazon’s emphasis is on expanding the reach and usefulness of Alexa and pointed out Alexa has over 45,000 skills from third-party developers and is part of 13,000 smart home devices in addition to recently expanding into hotels.

“Right now, the biggest thing we can do is make it as useful as possible and make devices that can use the skills,” Olsavsky said.

In a 35-point list of Q2 highlights, Amazon called out moments like the release of the Fire HD 10 Kids edition tablet; the release of Echo and Alexa in France as well as Echo Spot in India and Japan; the release of machine learning tools for developers to make Alexa skills more engaging and discoverable; the release of the program that helps entrepreneurs start their own last-mile delivery companies; the release of do-it-yourself home security system Ring Alarm; the receipt of 22 Emmy nominations for original programming; the renewal of the streaming partnership for Thursday Night Football, which will be available through the 2019 season; and the debut of try-it-on-at-home fashion service Prime Wardrobe.

Amazon also said net sales are expected to be between $54 billion and $57.5 billion in Q3, or to grow between 23 and 31 percent compared with the third quarter 2017. Operating income is expected to be between $1.4 billion and $2.4 billion, compared with $347 million in the third quarter of 2017.